US 10-year yield declined significant overnight, closing below 4% psychological at 3.967, as investors flocked to the safety of bonds amidst growing concerns over the banking sector. This shift in sentiment was triggered by New York Community Bancorp’s unexpected quarterly loss and subsequent dividend cut, which led to a steep 34% drop in its stock. The unease quickly spread to other smaller lending institutions, reigniting memories of last year’s brief banking crisis and spurring a rush towards Treasury bonds.
This flight to safety was further influenced by the Treasury Department’s announcement. It revealed moderate increases in upcoming Treasury auctions for shorter-duration bonds, specifically two-, three-, and five-year government bonds, while signaling only minimal increases for longer durations, including 10 years and beyond. Notably, the Treasury indicated that these adjustments are likely to be the last for several quarters.
Technically, 10-year yield’s rebound from 3.785 should have completed at 4.198, after rejection by 55 D EMA (now at 4.147), and ahead of 38.2% retracement of 4.997 to 3.785 at 4.247. Deeper fall is expected towards 3.785 low, but stronger support should be seen there to bring rebound, to extend sideway trading first. However, firm break of 3.785 will resume the whole decline from 4.997, with 3.253 medium term support as next target.
